Selling Your Limited Company – Tax & Practical Guide

Welcome to Selling Your Limited Company – Tax & Practical Guide – your essential guide to what every director needs to know before they exit or sell.

Plan your exit early and save tens of thousands in tax.

Many directors leave the biggest tax-saving opportunities until the last minute and end up handing over far more to HMRC than necessary. Whether you’re selling to a buyer, passing the business to family, or simply closing down, the difference between a good exit and a great one is almost always down to planning.

This factsheet clearly explains the tax differences between selling the business assets versus selling the shares, how Business Asset Disposal Relief (formerly Entrepreneurs’ Relief) works in 2026/27, smart pre-sale planning steps you can take right now, and a practical due diligence checklist that buyers will expect.

Whether you’re thinking about selling in the next 12 months or just want to be prepared for the future, you’ll finish this guide knowing exactly how to maximise your after-tax proceeds and avoid common pitfalls.

Remember, every company and every exit is unique – this is general guidance only. For advice tailored to your situation, we strongly recommend speaking to a professional accountant.

Section 1: Business Sale vs Share Sale – tax differences

When you decide to sell your limited company there are two main routes: a share sale (you and other shareholders sell your shares in the company) or an asset sale (the company sells its business assets, goodwill, stock, equipment, property, etc.). The tax outcome for you as the seller is dramatically different.

Share Sale (most directors’ preferred option)

• The company itself pays no Corporation Tax on the sale.

• You (the shareholder) pay Capital Gains Tax on the profit you make from selling your shares.

• With Business Asset Disposal Relief (BADR) the effective rate is 18% on qualifying gains up to your £1 million lifetime limit (from 6 April 2026).

• Without BADR the rate is 18% (basic rate) or 24% (higher rate).

• Proceeds go straight into your pocket – no second layer of tax.

• Buyer pays 0.5% Stamp Duty on the shares.
  

Big advantage for you: single layer of tax and often the lowest overall bill.

Asset Sale (more common when the buyer wants to cherry-pick)

• The company pays Corporation Tax on any gain made on the assets sold (19%–25% depending on total profits).

• You then have to extract the sale proceeds from the company, usually via dividends or a Members’ Voluntary Liquidation – triggering a second tax hit (dividend tax or further Capital Gains Tax).

• This “double taxation” usually leaves you with significantly less money in your pocket.

• Buyer benefits: they get a fresh base cost on the assets, can claim capital allowances, and avoid inheriting the company’s tax history or liabilities.
  

Quick Comparison Table (Seller’s View – 2026/27)

Aspect	Share Sale	Asset Sale
Corporation Tax	None	19–25% on company gains
Your personal tax	CGT at 18% (with BADR) or 18/24%	Dividend tax or CGT on extraction
Layers of tax	Single	Double
Typical net proceeds	Higher	Lower
Buyer appeal	Lower (they inherit everything)	Higher (clean slate + allowances)

Most directors prefer a share sale because it is cleaner and far more tax-efficient. However, buyers often push for an asset sale to reduce their own risks and gain tax reliefs.

The good news? You can usually reduce the tax bill on a share sale even further with Business Asset Disposal Relief – which we explain in full in Section 2.

Section 2: Entrepreneurs’ Relief / Business Asset Disposal Relief (current rules)

Business Asset Disposal Relief (BADR) – still widely referred to as Entrepreneurs’ Relief – is the single most valuable tax break available when selling your limited company. It reduces the Capital Gains Tax (CGT) rate on qualifying gains from the normal 18% or 24% down to a flat 18% for the 2026/27 tax year.

Current 2026/27 Rules

• Lifetime limit: £1 million of qualifying gains per person (this has been the limit since March 2020 and remains unchanged).

• Tax rate: 18% on gains up to the £1m limit (increased from 14% in 2025/26).

• Maximum saving: Up to £60,000 per person compared with the standard higher-rate CGT of 24%.

Each spouse or civil partner has their own separate £1 million limit, so a couple can potentially shelter up to £2 million of gains between them.

Who Qualifies (the main tests)

For a share sale (the most common route), you must:

• Own at least 5% of the shares and voting rights

• Have been an officer or employee of the company for at least two years before the sale

• The company must be a trading company (or the holding company of a trading group)
  

The relief also applies to the sale of business assets if you are disposing of the whole or part of your business.

How It Works in Practice (Share Sale Example)

You sell your shares and make a £800,000 gain. With BADR you pay £144,000 CGT (18%). Without BADR you would pay £192,000 (24% higher rate). Saving: £48,000

Any gain above the £1 million lifetime limit is taxed at the normal 18% or 24% rates.

Important Notes for 2026/27

• You must claim BADR on your Self Assessment tax return – it is not automatic.

• Claim deadline: 31 January 2029 for a 2026/27 disposal.

• Anti-forestalling rules mean you cannot simply sign a contract early to lock in a lower rate if completion is after 6 April 2026.
  

BADR is one of the biggest reasons directors prefer a share sale over an asset sale – it can literally save tens of thousands in tax. In Section 3 we show you the pre-sale planning steps you can take right now to maximise this relief and protect it.

Section 3: Pre-sale tax planning (pension contributions, dividends, etc.)

The months (or even years) before you sell are your best chance to reduce the overall tax bill dramatically. Smart planning at this stage can easily save £10,000–£50,000+ depending on your company’s value.

Here are the most effective pre-sale steps directors take in 2026/27:

1. Maximise pension contributions

Company pension contributions are fully deductible from Corporation Tax and do not count as a benefit in kind for you.

• Pay the maximum £60,000 annual allowance (plus any unused carry-forward from the last three years).

• This reduces the company’s taxable profits before sale and moves value into your pension tax-free.

• Many directors boost contributions in the final 12–24 months to extract tens of thousands with zero immediate tax.
  

2. Extract profits as dividends while you still qualify for lower rates

• Pay yourself dividends up to the basic-rate band limit before the sale.

• This uses your £500 dividend allowance and 10.75% tax rate instead of leaving the money inside the company (which would be taxed again on extraction after sale).

• Do this while you still control the company and have sufficient retained profits.
  

3. Use salary and bonuses strategically

• Pay a salary up to the £12,570 personal allowance (fully deductible for the company and tax-free for you).

• Consider a larger bonus in the final year if it helps crystallise losses or use up any remaining basic-rate band.
  

4. Other powerful pre-sale moves

• Transfer shares to your spouse or civil partner to double the £1m Business Asset Disposal Relief lifetime limit.

• Crystallise any capital losses (e.g. from previous investments) to offset against the sale gain.

• Review and clear any overdrawn director’s loan account well before contracts are exchanged.

• Time the sale date carefully – for example, completing after 6 April can sometimes allow you to use a fresh tax year’s allowances.
  

Key timing tip: Start these actions at least 12 months before you expect to sell. The earlier you plan, the more options you have and the lower the risk of HMRC challenge.

In the next section we give you the exact due diligence checklist that every buyer will expect – getting this right can speed up the sale and protect your final proceeds.

Section 4: Due diligence checklist

Buyers will carry out detailed due diligence before they commit, and any gaps or surprises can lead to a lower offer, delayed completion or even a collapsed deal. Preparing this information in advance puts you in control and can speed up the sale by weeks.

Here is the exact checklist that experienced buyers expect to see. Start gathering these documents now – even if you’re only thinking about selling in the next 12–24 months.

Financial & Tax Records

• Last three years’ statutory accounts, management accounts and tax computations

• Corporation Tax returns (CT600) and VAT returns for the same period

• Up-to-date bank reconciliations and aged debtor/creditor lists

• Full schedule of all director’s loan accounts (with evidence they are cleared)

• Confirmation of all tax payments made and no outstanding liabilities
  

Legal & Company Documents

• Certificate of incorporation, articles of association and shareholder agreements

• Full company secretarial records (minutes, registers, PSC filings)

• Copies of all leases, contracts, supplier agreements and customer terms

• Intellectual property register (trademarks, domain names, software licences)

• Details of any charges, guarantees or litigation
  

Employees & Pensions

• Payroll records, contracts of employment and staff handbooks

• Pension scheme details and confirmation of auto-enrolment compliance

• Any redundancy or TUPE implications clearly documented
  

Assets & Operations

• Fixed asset register and proof of ownership

• Stock valuation and condition report

• Insurance policies and claims history

• Key customer and supplier concentration analysis
  

Pro tip: Create a secure online data room (Google Drive, Dropbox or a specialist platform) and upload everything in clearly labelled folders. A well-organised data room makes you look professional and often leads to a smoother negotiation and higher final price.

Getting this checklist right early removes the biggest cause of last-minute stress and price reductions.

In the Conclusion we bring everything together and show you how to take the next step with a pre-exit review.

Conclusion

Selling your limited company is one of the biggest financial decisions you will ever make. By planning your exit early, choosing the right sale structure (share sale vs asset sale), maximising Business Asset Disposal Relief, and completing smart pre-sale tax planning, you can legally save tens of thousands in tax and give yourself the cleanest possible exit.

A well-prepared due diligence pack also speeds up the process and often leads to a higher final sale price.

Book a pre-exit review

Book your free discovery call with Suzanne Lock Business Services today. We’ll review your current position, run the numbers on a share sale versus asset sale, check your Business Asset Disposal Relief eligibility, and create a clear pre-exit action plan tailored to you and your company.

Book instantly online at https://www.suzannelock.com/booking-calendar

The earlier you start planning, the more you keep. We look forward to helping you achieve the best possible exit.